Local Audit and Accountability Bill [HL]

Baroness Eaton Excerpts

Wednesday 22nd May 2013 Lords Chamber

[Baroness Eaton]

My Lords, I declare an interest as a vice-president of the Local Government Association, of which I am a former chairman. I also declare my interest as an elected member for Bingley Rural since 1986 on Bradford Metropolitan Council, where I had the privilege of being the leader between 2000 and 2006. I thank my noble friend the Minister for the clarity of her explanations and her willingness to have briefing meetings. I regret that I was unable to attend yesterday.

We are very well aware of the significant implications of the Bill for local government. As someone who has worked in local government for many years, I warmly welcome the Government’s commitment to cutting back on external inspection. Any measures that reduce interference with, and the burdens on, local government have to be welcomed. It is therefore regrettable that many of the proposed measures in the Bill centralise powers to the Secretary of State and allow central government to interfere with matters that should rightly be decided at a local level. The provisions to extend the referendum powers introduced in the Localism Act strike me as being anti-localist in nature and difficult to implement in practice.

On a point of principle, local elections exist so that people can pass judgment on the performance of their councils and the amount of council tax they charge. The United Kingdom is a representative democracy. We do not hold referendums every time the national government raise taxes, quite often by more than 2%, so why should we impose referendums on councils for managing their own finances? Elsewhere, the Bill reads as if it is possible for the Secretary of State to impose a different referendum limit on local authorities where their council tax increase for 2013-14 would have been excessive under the new definition, but not under the current definition. That is not fair to those who obeyed the rules, only to find out that the goal posts might be moved. It is like revising the speed limit downwards and then fining any motorist who has not obeyed the new limit before it was introduced.

From my experience as the LGA chairman, local government in England is subject to a variety of different levying arrangements in different areas, covering issues such as transport and drainage. As the proposals are currently drafted, there is the risk of serious perverse outcomes. For example, a drainage board in an area of high flood risk might be denied the funding it needs to improve flood defences without subjecting the local authority to one or more council tax referendums. Not only is this an additional cost to the local authority, it inhibits the delivery of government policy on flood defences. Likewise, growth measures, such as the building of new transport infrastructure, might be caught by this provision. Will the Minister please look further at these concerns? If there are particular issues that the Government have with individual levying authorities it makes more sense to sort these out individually rather than modifying the entire structure of local government finance.

A further measure in the Bill that is causing concern for councils has already been mentioned by my noble friend Lord Tope. I refer to the proposal for a statutory code of practice on local authority publicity. This clause is unnecessary as there is no evidence that council publications are competing unfairly with local newspapers and, by the Government’s own admission, very few councils are breaking the existing recommendations. The Bill, as currently drafted, will introduce some very wide-ranging powers that will allow central government to direct a local authority regardless of whether it is complying with the code. That strikes me as a charter for central government to interfere, meddle with and second-guess councils.

It is also worth noting that the majority of councils produce newsletters because they are the most cost-effective way of reaching 90% or more of the local population. In my authority, which has well over 500,000 people, the publication does not look like a newspaper, has no political content whatever and is used regularly to inform people of changes in refuse collection, summer play schemes, and many things that they may well not have the benefit of enjoying but for the knowledge that they gain from the publication. By way of comparison with the council newsletters, 1% of local newspapers reach 90% or more people.

Before Parliament legislates to change the status of the code, I feel that the Government should set out the evidence for their decision. Will my noble friend the Minister therefore consider commissioning an independent review to establish what, if any, impact council publications have on local newspapers?

As I said at the opening of my speech, the Government's commitment to cutting back on the red tape of central inspection has been most welcome. This Bill makes provision for the appointment of local audit, the duties on auditors and local authorities and the role of the National Audit Office. Procuring local audit is a costly exercise for councils. In Clause 9, the Bill requires councils to have an independent audit panel that will advise the councils on their appointments. Others have mentioned, and certainly early indications show, that councils will have considerable practical difficulties finding enough suitably knowledgeable independent local people willing to serve in this capacity. I was pleased that the Minister did say that there is going to be some flexibility. Even so, I think that this area needs a great deal of thorough consideration during the Committee stage if this whole process is not to be incredibly burdensome.

It is also worth noting that national procurement of external audit is the most efficient way of procuring audit, at the best possible cost to local councils. This was demonstrated by the recent tendering exercise carried out by the Audit Commission. That exercise delivered savings to councils of £250 million. As a result, I would like the Government to ensure that sufficient flexibility is retained in the Bill to allow national procurement to continue as a way of helping councils secure savings for the future. As the Local Government Association has said, amending the Bill to allow for national procurement does not imply ministerial agreement to the approach. It simply demonstrates a willingness to keep the option available for the future.

I should like to finish by talking about the role of the National Audit Office. Having been critical of some of the provisions in this legislation, I am delighted to see that the Government have listened to advice from local government on the need for the National Audit Office to consult relevant parties when developing value for money studies. It is crucial that the National Audit Office works with councils on its programmes of studies, as this is the best way to achieve the most efficient system.

I do, however, share the view held by the LGA that there should be a limitation on the number of studies the National Audit Office is able to conduct each year. I am concerned that there is potential for mission creep given the absence of any constraints or limits regarding the total number of studies per year. This burden is precisely the sort of the thing the Government have rightly tried to prevent under the new audit regime and it would be a shame for the National Audit Office to become the “Audit Commission lite”.

The reduction in central inspection and changes to the audit regime are largely welcome. But I do hope that the Minister takes my constructive criticism of the council tax referendum and publicity code provisions in the spirit in which they are meant. I would welcome a Government response to my fears of the unintended consequences of the council tax clauses. I would also like the Minister to explain why the provisions for the publicity code create such wide-ranging powers for central government when there are hardly any councils breaking the spirit of existing guidance.

I feel that it is the role of this Chamber to offer an honest assessment of the measures put before us and arguably our most crucial role is helping to improve legislation in a spirit of consensual debate. I am sure that, across the House, we can improve this Bill in the way we need to.